UPS Creates Greater Positive Outlook For 2011

JP Morgan has published a research report on United Parcel Service UPS after the company increased cash funding that reduces its 2011 pension expense risk, and is now more likely to engage in a large buyback. In the report, JP Morgan writes "Earlier this week UPS issued $2 billion of notes and within their term sheet they communicated the intention to use the proceeds along with $1.2 billion in cash to make cash contributions to their domestic pension funds. We believe this is a positive move for UPS stock because it largely removes the risk of a pension expense headwind in 2011 and it increases the odds of a large share buyback program in 2011. In this note we provide a framework for looking at the expense impact from the large pension cash contribution UPS plans to make in 2010." JP Morgan maintains its Overweight rating and $86 price target. United Parcel Service closed yesterday at $68.07.